Politics & Policy

A Good Deal of Credit to McCain for Stopping a Bad Deal

Boeing and blame.

In 2001, the United States Air Force wanted to begin replacing 500 of its aging refueling planes. The plan began with a sweetheart deal, buried in the fine print of the 2002 defense-authorization bill. The Air Force was to lease 100 Boeing fuel tankers at a cost of $26 billion — $6 billion more than the cost of buying them outright, according to an estimate by the White House Office of Management and Budget.

If that sounds like a bad deal, it’s because it was. It never occurred, thanks to loud and persistent protests from Sen. John McCain (R., Ariz.). And now that McCain is a candidate for president and Boeing’s rival has won the contract, Democrats are effectively complaining that he didn’t let Boeing rip off the taxpayers.

The sordid story of the Boeing lease deal took what may be its final turn on February 29, when the Air Force announced that it will buy 179 tankers — nearly twice as many — from Boeing’s rival, Airbus. The deal is valued at $35 billion (for perspective, $26 billion in 2001 was worth $31 billion in today’s dollars). McCain is proudly touting a government estimate of $6.2 billion in savings for the taxpayers that ultimately resulted from his aggressive investigation. Democrats are attacking him for blocking Boeing, one of the nation’s top corporations in both congressional lobbying and campaign contributions.

McCain took the initiative in fighting off the bogus Boeing deal, calling it a “corporate bailout” and “the worst, sleaziest rip-off of the taxpayers that I have ever seen in my 21 years here.” McCain vigorously investigated the deal before and after he became chairman of the Airland Subcommittee of the Senate Armed Services Committee. He spent two years trying to obtain incriminating internal e-mails from the company, and its unions launched vicious attacks on him in Arizona during what proved to be an easy 2004 re-election campaign.

When McCain finally received the e-mails, the Boeing tanker deal exploded. The investigation revealed malfeasance, resulting in a $615 million fine for the company. Boeing’s CEO, Phil Condit, was forced to resign. The company’s CFO was sent to prison. Darleen Druyun, who had served as the second-ranking civilian official for Air Force procurement, also went to prison. She pled guilty in 2004 to steering the tanker contract and other deals toward Boeing in the hopes of later securing lucrative jobs with the company for herself and her family members.

After the Air Force announced Feb. 29 that the tanker deal would go to Boeing’s chief rival, Airbus, Democrats decided to make this an election issue. They are not only faulting McCain for highlighting Boeing’s wrongdoing, but also turning their own ideological world upside down. Normally incensed by outrageous no-bid military contracts, top Democrats like Rahm Emanuel (D., Ill.) are attacking McCain for stopping a deal that would have needlessly enriched a major corporation at the expense of taxpayers. “We are sending the jobs overseas, all because John McCain demanded it,” Emanuel told the Associated Press.

Yet Airbus, a “foreign company,” will still be building most of these tankers in the U.S. — in Mobile, Ala., to be precise, and in partnership with the Los Angeles-based Northrop Grumman. The deal with Airbus’s military arm (the European Aeronautic Defence and Space Corp., or EADS) will come at a savings of $6.2 billion for taxpayers over the attempted Boeing deal. This raises the question: Are these complainers more interested in helping American companies, or in propping up a company that is long on campaign contributions and lobbying power, but short on economic competitiveness?

It’s not as though Boeing doesn’t get a lot from the government already — which is no surprise, considering that Boeing routinely spends more than $8 million lobbying Congress each year (last year it spent more than $10.6 million), part of it on lobbyist Linda Daschle, wife of the former Senate Majority Leader. Congress’s decision to bail out flagging airlines after 9/11 was a guarantee that cash and contracts would keep flowing Boeing’s way. And Boeing still receives an enormous share of military contracts — a 2004 report from the Center for Public Integrity identified Boeing as the second-largest military contractor, with $82 billion in deals between 1998 and 2003.

In addition to the Department of Defense, there exists an entire government agency whose main purpose is to subsidize Boeing. The United States Export-Import Bank made 53 percent of its loans and loan guarantees (in dollar terms) to Boeing between 1998 and 2004, to the tune of $32.7 billion.

Boeing complains, correctly, that Airbus also receives subsidies from both France and the European Union. And because of the contorted methods by which the U.S. government subsidizes Boeing, they argue that their subsidy meets the standards of the World Trade Organization, whereas most European subsidies to Airbus do not. Yet when the taxpayer’s money is being spent, such technicalities are less meaningful than the bottom line.

The final refuge of those whining over Boeing’s loss is the fact that Airbus is a foreign corporation, and that the U.S. military is now relying on foreigners to produce necessary military equipment. But for the most part, Americans will be building these planes. Boeing had estimated that it would have created 9,000 American jobs and supported 35,000 others had it received the contract. Airbus is estimating that it will create 2,000 American jobs and support 25,000. Even taking these assumptions at face value, Democrats are trying to convince American taxpayers that it is worth their while to fork over $886,000 for each of the additional 7,000 jobs that Boeing would have supposedly created, or $316,000 for each extra job “created or supported.”

McCain was not the one who awarded the contract to Airbus, but it’s a good thing he stopped it from going to Boeing in 2001. If 2,000 American workers — not to mention all American taxpayers — can benefit from subsidies provided by European governments, then why in the world should we not take advantage?

– David Freddoso is an NRO staff reporter.


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